How to Build Credit

Have you ever been denied for a loan because of limited or no credit history? This puts many people in a peculiar bind. It can be very frustrating to get denied for a loan, especially if you are trying to obtain the loan to build your credit in the first place. If you are in this situation, follow these steps to start building up your available credit.

– Stay current on the bills you already have. Delinquent bills and obligations of all kinds can show up on your credit report and this will make it difficult to get accepted for credit. Lenders want to see a healthy financial picture on your credit report across the board.

– Try to apply for a credit card or two. Remember to start small, maybe a department store or gas station card. If you get denied, do not keep applying for other cards hoping to get lucky. Too many inquiries on your credit report will make you seem desperate to the lenders.

– Your bank or credit union can be a great place to get your first credit card. Make some regular deposits to your account and be sure not to bounce checks or overdraw the account. Next apply for a secured credit card. The limit on this card will be secured by the money you have deposited in the bank. If you have no credit history the bank will be more likely to approve you for this type of card because if you default the bank has the option of using the funds in your bank account to satisfy the debt.

– Once you have a credit card, secured or unsecured, use it sparingly and pay it off every month. This is imperative to build a solid payment history which is essential to get approved for larger loans in the future such as a mortgage.

– As you build more and more available credit, be aware of common credit traps offering you quick cash or enticing you to spend beyond your means. Credit card companies do not make billions of dollars per year off of people who pay their bills in full every month.

Make sure to not get in over your head and keep your financial goals in mind. It makes sense to build credit to qualify for a good mortgage or for emergency purposes, but not for extra spending money. As long as you stay qualified your credit score and available credit will improve.